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Cocoa Company *

2016 2017

Cash 100 75

Cost of Goods Sold 1000 1100

Debt (LT) 10000 12000

Depreciation 2000 2200

Equity (total) 5300 5125

Interest Expense 600 720

Inventories 400 400

Payables 1200 1350

Property, Plant, Equipment 1600018000

Revenues 6500 7500

Salaries 2200 2100

Share Capital 4964 4491

* All values given are in 1000s ofdollars.

1. Construct a statement ofcomprehensive income for Cocoa Co. up through Earnings-Before-Taxes (EBT) for both 2016 and 2017. Use three columns: The leftcolumn should list the relevant accounts, the middle column shouldshow the appropriate values for each account in 2016, and the rightcolumn should show the appropriate values for 2017.

2. Compute full (combined federaland provincial) corporate taxes for Cocoa Co. for both 2016 and2017. Cocoa is a small corporation based in New Brunswick. As suchit pays only 15.5% (i.e., 11% federal and 4.5% provincial tax) onthe first $425,000 it earns, and then pays 27.0% (i.e., 15% federaland 12% provincial tax) on the remainder.

3. What was net income for bothyears?

4. If Cocoa’s payout ratio is always40%, what was the addition to retained earnings for both years?

5. Construct a statement offinancial position for Cocoa Co. for both 2016 and 2017. (Inconstructing the SFP, please use three columns: The left columnshould list the relevant accounts that appear on the SFP, themiddle column should show the appropriate values for each accountin 2016, and the right column should show the appropriate valuesfor each account in 2017.)

6. Calculate Cocoa’s current ratiofor 2017. Explain what it means, and state whether you think it’sgood news or bad news for Cocoa’s managers.

7. If the value of Cocoa’s assetsare to remain unchanged for the foreseeable future, and its profitsare expected to increase, what do you expect will happen to itsROA.